WASHINGTON – The Kansas City, Missouri School District (KCMSD) has agreed to
relinquish over $13.6 million in claims for federal funds and to pay the United
States $66,000 as a civil settlement relating to false claims and false
statements in connection with the Federal Communication Commission’s (FCC)
E-Rate program from 2002 to 2006, the Justice Department announced today.

The E-Rate program, created by Congress in the Telecommunications Act of 1996,
provides funding for needy schools and libraries to connect to and utilize the
Internet. The E-Rate program is funded by monies collected from telephone
users. The FCC oversees the program.

The United States contended that KCMSD pursued claims for payments for a
contract that had been cancelled, did not comply with the mandatory competitive
bidding process, and improperly extended contracts to avoid re-bidding. As part
of the agreement between the school district and the United States, KCMSD agreed
that three of its employees and the district’s consultant, Deitrich Lockard
Group, all of whom handled KCMSD’s E-Rate applications, would no longer play a
role in the program’s application and funding process for the school.

“The E-Rate Program makes federally mandated funds available to the poorest
schools in the nation for Internet access and wiring,” said Peter D. Keisler,
Assistant Attorney General for the Civil Division. “False claims to this very
important federal program will not be tolerated.”

The United States learned of the allegations settled by KCMSD when a relator,
American Fiber Systems Inc., filed a qui tam or whistleblower action in May
2006. The settlement resolves both the relator’s and the United States’ claims
against KCMSD.

The resolution announced today resulted from an ongoing federal investigation
of fraud and anti-competitive conduct in the E-Rate program in connection with
the Kansas City schools. The investigation is being conducted jointly by the
Justice Department's Civil Division, the U.S. Attorney's Office for the Western
District of Missouri, and the FCC Office of the Inspector General.